Care sector faces mounting financial challenges

As many as one in eight of Britain’s care homes could fall into insolvency within the next three years, according to the latest research.

The study has laid bare the scale of the financial strain which the current climate is placing on the care sector, with mounting costs and a dearth of funding from local authorities among the main pressures on finances.

The National Living Wage, which was introduced earlier this year, has also compounded the situation for many care homes – particularly smaller operators.

The difficulties facing the sector have become increasingly apparent in recent years. In 2014/15, 47 operators became insolvent, rising from 40 in the previous 12 months and 35 in 2012/13.

A year ago, the largest provider in the UK, Four Seasons Health Care, closed seven of its premises, having decided that they were financially unviable.

The business then teamed up with a number of other care companies and wrote to then Chancellor George Osborne, impressing upon him the importance of increasing social care funding to offset the mounting financial pressures.

Speaking earlier this year, Martin Green, the chief executive of the provider representative body, Care England, said that many years of underfunding and spiralling costs were pushing a growing number of homes to the brink.

“We have had the National Living Wage, pension auto-enrolment, and significant increases in CQC fees, all of which have been levied onto the sector without commensurate increases in fees,” he said.

“These increases are making care services in both residential and domiciliary care unsustainable and I am particularly worried about the impact on small providers, who may well be forced into liquidation because the funding is inadequate.”